On September 23, Goldman Sachs lowered its S&P 500 year-end forecast for the fourth time in 2022. Goldman’s current estimate is 3600, 29% lower than the 5100 level it had predicted at mid-February.
A new discovery from financial news site Safetradebinaryoptions analyzes how Wall Street got its 2022 target wrong.
Safetradebinaryoptions author Saqib Iqbal commented on the findings:
“The market suddenly went from buying everything to selling everything. Unexpected events like the Russian invasion of Ukraine resulted in the highest consumer costs in 40 years. As a result, the Fed and its counterparts have worked to contain inflation, ultra-low interest rates and monetary stimulus. Basically, the cornerstone of the post-pandemic surge is gone. »
So far, 2022 has been a year in which almost everyone on Wall Street has been wrong. In December, analysts at the world’s largest investment firms, such as JPMorgan, forecast the S&P 500 to rise 5% in 2022.
Economists have predicted that the 10-year US Treasury yield will average 2% by the end of the year. Even Goldman Sachs has confirmed that Bitcoin is on track to hit $100,000.
Even Jerome Powell, the chairman of the US Federal Reserve, could not foresee the inflationary turbulence. He predicted that price increases would slow to levels closer to the Fed’s long-term target of 2% by the end of 2022.
Markets, on the other hand, collapsed. No major asset class was spared, including stocks, bonds, real estate, and cryptocurrency.
So what is the reason for all this?
There are several reasons for this:
high inflation for several decades,
aggressive tightening of monetary policy by the Federal Reserve, and
the effects of the Russian-Ukrainian war.
Many economists and institutions predicted higher interest rates and greater volatility at the start of the year. They weren’t wrong, but they didn’t expect it to happen so quickly.
They assumed it would be a more phased approach. However, the war in Ukraine caused energy costs to skyrocket and supply chain issues lasted longer than expected, leading to soaring inflation.
The Fed’s response was clear: it would tighten policy quickly until inflation fell.
So that led to all the uncertainty that we see in the markets today.
Looking ahead, no one can predict when the Russian-Ukrainian war will end, supply chain bottlenecks caused by China’s strict COVID-19 rules will ease, and the politics of the Fed will tighten.
So maybe it’s better to hide the money under the mattress!